NDA: How to Share a Secret and Still Keep It

The Value of Trade Secrets

What exactly is a trade secret? In short, it is everything you know that your competitor does not, which gives you a competitive edge over them. A trade secret can encompass both technical and business information.

The technical information may include details about an invention that has not yet been patented. It can also encompass documentation and research related to the invention, such as test results and analyses or parameters for optimal effect, which may not be directly included in the patent. Business information can be market analyses, business strategies, budgets, customer lists, and much more.

All this business sensitive information is crucial to protect, and in an ideal world, you would not share such confidential information with anyone. As everyone knows, the more people who know a secret, the greater the risk that someone will disclose it to outsiders. And then it is no longer a secret.

However, it is inevitable that you at some point will need to share such sensitive information with researchers, partners, manufacturers, external consultants, investors, board members, and others.

It is therefore essential to do everything possible to protect the confidentiality, ensuring that the information is not disseminated to unauthorized parties or misused by the recipient.

How Can You Protect Yourself in a Reasonable Way?

The question is, how do you protect yourself? First, it is important to be conscious of what and how much information you share. Limit the dissemination as much as possible and do not share more than absolutely necessary. Most importantly, enter into a confidentiality agreement with the recipient of the information.

A confidentiality agreement, often referred to as a non-disclosure agreement (NDA), must always be signed before confidential information is disclosed. Such an agreement can be relatively brief and simple, but it must contain certain provisions, which we will soon discuss.

A confidentiality agreement can be unilateral or mutual. If the confidentiality obligation is imposed only on one party, it is often referred to as a confidentiality declaration. These are commonly found in employment agreements, where they are part of a larger contract. In other contexts, one may need to sign a simple confidentiality declaration to receive information or gain access to research departments. The confidentiality agreement can be between individuals, between a company and an individual, or between companies. It can also be entered into by multiple parties.

Why is this so important? Because if you share information about your invention with third parties before filing a patent application, you may have jeopardized your chance of obtaining a patent. To be granted a patent, the invention must be new, and the technical solution must not be publicly known. If you have shared details with third parties without them being bound by confidentiality obligations, the invention is considered to have been made public, and the novelty requirement is not met.

If you have entered into an NDA, and the recipient of the confidential information discloses it in violation of the agreement, you may still obtain a patent because, as the inventor, you have taken steps to prevent such disclosure through the agreement. You will also be in a stronger position in any subsequent legal dispute. Furthermore, it sends a clear signal to the recipient that you are serious about protecting your rights, hopefully making them more aware of the importance of keeping the information confidential.

How to Draft an NDA or Confidentiality Declaration

How do you draft a confidentiality agreement or NDA? Several websites offer free NDA templates for download. These can often serve as a good starting point, but you must be confident that people behind the website you are downloading from know what they are doing. Additionally, it is important to tailor the confidentiality agreement to the specific purpose. Even if you have a standard agreement, it must be adjusted for each individual case. Here, you should always seek guidance from your in-house lawyer or an external attorney at law.

Here are six things to consider when drafting a Non-Disclosure Agreement:

• ·Should it be mutual or impose confidentiality obligations only on one party?
• ·Should it be time-limited or perpetual?
• ·How long should the confidentiality obligation last?
• ·What can the recipient use the information for?
• ·Should a breach of confidentiality impose liquidated damages or just general compensation for damages?
• ·Which country’s law and courts shall apply if the NDA is between parties from different countries?

Can You Solve Everything with an NDA?

Can everything be solved with an NDA? The short answer is no. A confidentiality agreement is a simple and cost-effective first step in protecting your trade secrets. However, an NDA alone does not secure any rights against third parties. If you have an invention, you can initially protect it with confidentiality agreements until the development has progressed to the point where it is possible to file a patent application. The patent will then provide real protection against third parties and ensure that competitors cannot copy your patented solution.

Are Your Trade Secrets Safe with an NDA?

Is entering into an NDA all you need to do to protect a trade secret. Of course not, you will also need to treat the information confidentially and make sure it is not easily accessible to those who should not see it. Contact us for more information on how to handle your trade secrets and how to monetize them.